Home values have spiked across Dallas County, but middle class neighborhoods like this one near White Rock Lake have seen values rise more than any other class of home. (David Woo/The Dallas Morning News)

A taxing problem

Were you shocked when you opened your property tax assessment this year?

If so, you’re not alone.

Property values and the taxes that come with them are on the rise across Dallas County.

But it is the middle class who, once more, are bearing the heaviest burden — while most businesses and the wealthy are catching a relative break, according to an analysis by The Dallas Morning News.

“At this rate, I’ll be taxed out of my house in the next three to four years,” said Doug Silver, a 46-year-old film worker who lives near White Rock Lake and saw his assessment climb 9 percent this year. “It’s the American dream, right?”

While most Dallas County home values rose by less than 10 percent this year, the middle class, with homes worth $100,000 to $250,000, saw a higher increase of 11.2 percent. And the wealthy, with homes valued at over $1 million, saw a median increase of just 7.5 percent, The News found.

Changing home values by price

The median middle-class home in Dallas County increased in value by 11.2 percent from 2015 to 2016 — far more than the typical change in any other price category.

Source: Dallas Central Appraisal District

Homeowners were more likely to see their taxes go up than the owners of commercial properties. About 73 percent of Dallas County homeowners saw their property values increase vs. 30 percent of commercial properties.

“I’m disheartened to hear the numbers — we are shifting the burden to middle-class housing,” said Philip Kingston, who represents Lakewood and other pricey areas in eastern Dallas on the City Council. “That seems to be a very perverse practice. We want to bring the middle class back.”

The News analyzed hundreds of thousands of preliminary county appraisal records released this month. The numbers will become official in July after the appeals process ends. That process has historically favored businesses and those who can hire consultants and lawyers. Meanwhile, middle-class homeowners typically struggle to fight back on what some see as an uneven playing field.

Findings

Our analysis found:

In the city of Dallas, the majority of homeowners with properties worth $100,000 to $250,000 saw appraised values rise 12 percent or more this year.

Properties in Dallas valued between $250,000 and $500,000 saw a 10 percent increase.

Dallas properties valued between $500,000 and $1 million saw an 8 percent increase.

Homes in Dallas worth more than $1 million saw an increase of 6.7 percent or less.

The differences between the middle class and the wealthy are even starker in cities such as Cedar Hill, DeSoto, Garland, Grand Prairie, Rowlett and Sunnyvale.

In those cities, most owners of homes worth more than $500,000 saw an increase in value of less than 3 percent this year. But most in the middle class — those with homes between $100,000 and $250,000 — saw a rise of at least 10 percent.

In the majority of Dallas County cities, most middle-class home values rose faster than the growth of the overall market this year.

State law prohibits the yearly rise in taxable property values from exceeding 10 percent for homeowners who claim homestead exemptions. But total assessed values can be higher. So people who saw huge growth this year likely will see their taxes increase in future years.

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A fleeing middle class

The middle class has been fleeing the city of Dallas for more than a generation, and a key focus of City Hall is enticing them to return. Despite that, census data shows that Dallas is becoming a two-tier city, one that is increasingly home to the very wealthy and the poor.

The current property tax system could exacerbate that problem, officials fear.

Local officials say they are hamstrung by state law in trying to accurately assess commercial and high-end residential properties. Texas, unlike most other states, doesn’t require real estate sales prices to be publicly disclosed. Property owners who can afford pricey Realtors often demand nondisclosure agreements. State law also permits property owners who successfully challenge their appraisals to collect attorneys fees from the county.

“They say, ‘We’ve got lots of lawyers and lots of money — if you fight with us, you’ll end up paying our legal bills,’” said Dallas County Judge Clay Jenkins. “All that has a quelling effect on the appraisal districts being able to be aggressive. And it leads to more and more tax burden on middle-class families.”

Jim Perry fears his daughter, Karla Perry, won’t be able to afford to live in his Old Lake Highlands home in the future because of property taxes. (Andy Jacobsohn/The Dallas Morning News)

Jim Perry, 78, was shocked when he opened his appraisal notice this month. The property value on his Old Lake Highlands home had risen 42 percent. He won’t protest because the district attributed the growth to the land, which he believes is harder to argue with than, say, a broken roof.

He feels he and his daughter have no choice but to pay — as long as they can afford it.

Low- and middle-income families often have a harder time protesting their assessments. It could involve taking time off work or hiring an expensive professional. But property tax consultants say all owners should protest because assessing is highly subjective and government valuations skew toward the highest possible value.

“They’re high on a lot of properties,” said Evan Fetter, a local consultant. “It’s really a totally unfair system.”

Appraisers say middle-class values rose faster than others because the demand for housing, particularly for homes in the $100,000 to $300,000 price range, is outpacing the supply.

“That’s the real estate market — that’s not us,” said Ken Nolan, the district’s chief appraiser. “You’d have to ask the people buying the homes why they paid that. I reflect it, I don’t explain it.”

Mapping Dallas County's changing home values

For Dallas County homeowners, changes to their homes' value tended to track closely with their neighbors.

Choose a price range to see how home values have changed in the last year. Zoom in to see trends by neighborhood.

Home value changes

Increased 10%+

Increased 5%–10%

Increased 0%–5%

No change

Decreased

$0–$100,000

$100,000–$250,000

$250,000–$500,000

$500,000–$1 million

$1 million or more

Source: Dallas Central Appraisal District

A break for commercial property

Commercial property owners, meanwhile, were far less likely than homeowners to see their valuations change. Seventy percent of commercial properties saw no increase in values in Dallas County.

Yet experts say the local commercial real estate market is booming, just like the high- and middle-income residential market.

“This is a pretty good time to be in Dallas-Fort Worth commercial real estate for sure,” said Chuck Dannis, a private real estate appraiser who teaches at Southern Methodist University.

Given the market, it’s hard to understand why so many commercial properties did not see their valuations rise, Kingston said.

Residential & commercial property value changes

Most residential properties in Dallas County rose in value between 2015 and 2016. But less than a third of all commercial properties became more valuable in the same period, according to figures released by the county appraisers.

Source: Dallas Central Appraisal District

State law requires the government to assess all properties at market value to ensure “equal and uniform” taxation. That becomes complicated in a non-disclosure state.

Nolan, the county’s chief appraiser, acknowledged that his job would be much easier if he had access to sales price information. But he defended the model his appraisers use — which typically involves estimating the income that could be derived from a commercial property and evaluating its competitors. The process is different for residential assessments. Those take into account the sales prices of comparable homes.

Asked how the values of two-thirds of commercial properties could stay the same this year despite the booming market, Nolan said business conditions may not have changed in those areas. For example, some apartment complexes have seen their rents, occupancy and expenses all stay the same, he said.

Nolan said that even though so many commercial properties did not see their values rise, the county’s total property tax base is split almost evenly between homeowners and businesses. So “the burden seems to be fairly distributed,” he said.

Outside of lobbying legislators to require real estate transactions to be disclosed — which the city of Dallas does every year — there’s not much that local officials can do to change the system. The real estate and business lobbies are too powerful, officials said.

The only way officials can reduce the burden on taxpayers is by lowering their tax rates.

Where was the middle class squeezed the hardest?

Dallas County residents have seen their property values go up at different rates depending on the value of their homes. The disparity between the middle-class and the wealthy is starker in some cities than others.

Select a city to compare how homes of different values changed this year.

Source: Dallas Central Appraisal District

Lower tax rates?

After hearing of the eye-popping increases, Jenkins contacted Dallas Mayor Mike Rawlings and Dallas ISD Superintendent Michael Hinojosa. He wanted to talk about lowering tax rates. No local government projected a 10 percent increase in tax revenues. The county, for example, planned on a 7.5 percent jump. The city of Dallas had planned for a 6.7 percent increase.

In an interview, Rawlings said he’d be open to lowering rates, something that some fellow council members would consider as well. Lee Kleinman and Jennifer Staubach Gates have already indicated support.

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Still, Rawlings said City Hall could greatly use the extra money. City Manager A.C. Gonzalez recently told Rawlings the city needs $35 million more to improve basic city services that residents want, such as higher police pay and filled-in potholes.

Rawlings, whose $2.3 million Preston Hollow home didn’t change in value this year, said he’s concerned about the effect of rising property tax assessments on the middle class.

“It’s a problem for those folks, and they’re the ones that can’t afford it,” he said. “But I think it’s also showing that the middle class is moving back into the city, and it’s showing that Dallas is a place where people want to live.”